Image credit: MAS (From Consultation Paper on the Proposed Payment
Services Bill, page 12)
The Monetary Authority of Singapore (MAS) has launched
a second consultation on its proposed payments regulatory framework, known as the
Payment Services Bill (the
Bill). The public consultation will run from 21 November 2017 to 8 January
The Bill will streamline the regulation of payment services
under a single legislation, expand the scope of regulated payment activities to
include virtual currency services and other innovations, and calibrate
regulation according to the risks posed by these activities.
When the new Bill is enacted, payment firms will only need
to hold one licence under a single regulatory framework to conduct any or all
of the specified payment activities. There will be three classes of licences
that an entity can apply for under the Bill. A payment service provider may
apply to be a a) Money-Changing Licensee; b) Standard Payment Institution, or
c) Major Payment Institution.
The single licence will permit a licensee to undertake
specific activities as set out in its licence. Multiple licences will not be
required for different payment activities. If the licensee conducts more
payment activities than originally applied for, it must seek MAS’ approval to
conduct other payment activities.
Only payment activities that face customers or merchants,
process funds or acquire transactions, and pose relevant regulatory concerns
will need to be licensed.
The new framework will expand the scope of regulation to
include domestic money transfers (e.g. transferring money through payment
kiosks), merchant acquisition (e.g. acquiring transactions through a
point-of-sale terminal or online payment gateway), and the purchase and sale of
MAS wants to ensure that the expanded scope of regulation is
not onerous. To do so, the Bill will differentiate regulatory requirements
according to the risks that specific payment activities pose rather than apply
a uniform set of regulations on all payment service providers.
For instance, MAS proposes to exclude smaller entities from
requirements on technology risk, user protection, and interoperability
requirements, and only subject them to AML/CFT and general requirements.
The Bill will empower MAS to regulate payment services for
money-laundering and terrorism financing risks, strengthen safeguards for funds
belonging to consumers and merchants, set standards on technology risk
management and enhance interoperability of payment solutions across a wider
range of payment activities.
MAS is seeking comments on 23 questions in the consultation
document, on issues such as whether
the definitions of e-money and virtual currency accord with industry
understanding of these terms and whether the description of the activities
excluded from financial regulation is sufficiently clear and whether more
activities should be excluded.
Other matters being explored include the proposed single
licence structure and and whether this approach is beneficial for potential
licensees, the proposed capital and security deposit requirements, the AML/CFT (anti-money
laundering/ countering the financing of terrorism) requirements and the interoperability
powers (MAS is proposing to include in the Bill powers to mandate any Major
Payment Institution to adopt a common standard to make widely used payment
acceptance methods interoperable. One example of such a measure is to mandate
that payment account issuers and merchant acquirers adopt a standardised
MAS is also inviting payment users to give feedback on the
proposed payment user
MAS Managing Director, Mr. Ravi Menon said, “We want to put
in place a forward-looking regulatory regime to encourage wider adoption of
secure e-payment solutions. The novel, activity-based licensing framework aims
to right-size regulatory requirements to address the risks posed by specific
payment activities. This will help to protect consumers and merchants while
creating an environment conducive for innovation in payment services.”